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(Feb-10) Asian markets are expected to open on a shaky note after President Donald Trump announced tariffs on all steel and aluminum imports. This has led to a drop in commodity currencies and a decline in Asian stock futures. The Australian, New Zealand, and Canadian dollars, as well as the euro, fell in early trading. Equity futures in Australia, Japan, and Hong Kong are also pointing down.
Trump’s comments have added to market jitters, with a 25% levy on steel and aluminum imports set to be announced on Monday. This comes ahead of Federal Reserve Chair Jerome Powell’s upcoming testimony, which will be crucial in assessing the impact of these tariffs.
SA still under pressure at the back of the expropriation bill.
The S&P 500 index fell by 1% on Friday due to tariff concerns and a decline in consumer sentiment. The dollar rose after jobs data showed a healthy labor market. Nonfarm payrolls increased by 143K, with the unemployment rate dropping to 4.0%.
In Asia, Chinese shares will be closely watched, especially in the tech sector, as the Lunar New Year spending boom may mask underlying deflationary pressures in the economy. Goldman Sachs economists noted that the seasonal boost in China’s inflation is likely to turn into a drag in February.
(Feb-06) US Jobless claims rose by 11K to 219K for the week ending February 1, staying relatively low. This level is consistent with pre-Covid figures, and private employment data indicates strong hiring in January. However, despite a calm January, several major companies have announced staff reductions for early February, hinting that the quiet period may be short-lived. USDZAR saw a slight rally after this to a low of 18.5740 on a 15min window.
(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.
(Feb-07) SONA - President Cyril Ramaphosa’s Medium-Term Development Plan aims for inclusive growth and poverty reduction, targeting over 3.0% economic growth through infrastructure investments and reforms in state-owned enterprises. Social measures include support for the unemployed and expanded education access. The plan also focuses on building a capable, ethical state, supporting black-owned businesses, and addressing water shortages with new infrastructure and efficient management.
(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.
(Feb-10) On Friday (07-Feb) we saw a turn from balance or net short USDZAR position to being net long USDZAR from clients. (*) This is not surprising given the recent growing tensions between SA and the US.
(Feb-10) Latest implied topside is 18.65 but we could go higher if there is not indication of a de-escalation between SA and the US.
(Feb-10) Clients are now net-long USDZAR.
(Feb-07) US initial Jobs signaled to growing unemployment, then we saw an under shot in nonfarm payrolls at 143K (vs exp. 175K) but the unemployment rate printed lower at 4%. The market found it hard to interpret this information and we saw ZAR hitting a low of 18.36 and a high of 18.50.
(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.
By Thuto Mukena - Institutional Sales Specialist (Feb-10)
USD/ZAR implied vols eased on Friday as weaker-than-expected U.S. payrolls reports (143k vs. 170k cons.) supported ZAR gains. The pair extended its weekly resilience, closing firmer at R18.4146/$. Consequently, 1-week implied vol declined by 1 vol points to 12.22%, tracking spot moves. This morning, the local unit steps in the red and has reversed Friday’s gains , pulling local implied vols higher following the U.S. decision to officially withdraw financial aid to South Africa. Initial reaction from open saw spot levels stage a brief recovery to R18.6444/$ in the early hours, however that momentum higher has dried down. This week all eyes shifts to the U.S. CPI print, which will be pivotal given Friday’s upside surprise in average hourly earnings (4.1% y/y vs. 3.8% cons.). The 1-week USD/ZAR volatility risk premium now stands at 4.47%, above its 1-week average as the market braces for the week ahead.
Friday’s session saw a broad risk-off tone, with EM and G10 currencies mostly lower. Despite this, implied vols reflected a more measured reaction as markets digested the U.S Payroll figures. AUD/USD 1-week implied led declines, down 72bps, followed by USD/CAD 1-week implied vol (-76bps). The high beta space saw similar momentum, USD/MXN and USD/CNH 1-week implied vols dropped by 58bps and 22bps, respectively.
By sizwe Mfayela - Institutional Sales Specialist (Feb-07)
Economic data releases